YANGON -- Housed in a stately colonial building at the heart of Myanmar's financial district sits the Yangon Stock Exchange, which amid great expectations opened its doors as the country's first bourse a year ago this month.
Fast forward to today, and the exchange, known as YSX, is struggling. With only four listed issues, trading volume is on a downward trajectory, and stock prices slumping.
The plight of the exchange presents a sharp contrast to the time immediately before and after its March 25, 2016, debut, when it drew crowds of ordinary citizens trying to convert cash stashed under mattresses into shares. But over two recent trading days, the exchange was nearly deserted.
Myanpix, the YSX-calculated stock price index, lost 9.87 points Friday to close at 593.77, or less than half the peak reached last March. Only 7,290 shares changed hands, just 5% of the highest recorded amount.
Sliding share prices
The brain child of Myanmar's central bank, Japan's Daiwa Institute of Research and the Japan Exchange Group, the exchange was conceived as a "cradle for the private sector" in a country where banking is still in its infancy. Initially, about 10 companies were expected to go public, but the number stands at only four. However, Deputy Minister for Planning and Finance Maung Maung Win insists the YSX is not underperforming its counterparts in Indonesia and Vietnam after a year of operation.
Real estate developer First Myanmar Investment, YSX's first initial public offering, hit a record high of 41,000 kyat ($30) a year ago, but has since trended downward and is currently trading in the 16,000 kyat range. First Private Bank, which debuted on the YSX board in January, made a splash on IPO day, with the shares going limit-up to 34,000 kyat, but has since failed to surpass the opening price.
Market watchers say the biggest culprit is a lack of investors. At present, roughly 30,000 domestic trading accounts have been created. With few institutional investors like Japan's life insurers, nearly all the investors are individuals. And they expressed interest in stocks as investment opportunities in a country where confidence in banks, marred by a history of frequent bank runs, is so low that assets are typically held in the form of jewelry or foreign currency. "Misunderstanding is widespread that stocks are bound to be profitable, and a lot of people quickly lost interest as soon as stock prices dropped," said an official with a local brokerage company.
In need of blue chips
Aside from industry leader First Myanmar Investment, none of the listed companies are the cream of the country's crop. Myanmar Thilawa SEZ Holdings, the second IPO, specializes in the development of a roughly 400-hectare industrial park and has little room for growth. The remaining two issues -- Myanmar Citizens Bank and First Private Bank -- are lower-ranked banks.
It's not that Myanmar has no prominent companies with solid profitability and modern corporate governance. Among them are retail giant City Mart group and conglomerate Max Myanmar. "The problem is that there are only short-term shareholders, and there is little for companies to gain by going public on YSX, where prices swing wildly," said Win Win Tint, president of City Mart.
YSX officials now believe that broadening the base of stock investors is absolutely essential, and are stepping up efforts to educate potential investors in regional cities. This month the stock exchange hosted a stock investment seminar for the wealthy in the northeast state of Shan. Similar events will be held in five other locations within the year. "We start off with explaining what a stock is," said a senior YSX official.
Another catalyst would be the participation of overseas investors. The government plans to amend the corporate law to open the path for foreigners to own shares in Myanmar companies. That could let them trade shares on YSX. All things considered, however, YSX is not an attractive investment venue for overseas investors at this point.
To change that, Myanmar must encourage major corporations to list their shares, while at the same time cultivating a financial culture conducive to stock investment.